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Where's My Refund?
The IRS provides a "Where's my Refund" (https://www.irs.gov/refunds) tool to check the status of your refund. The "Where's my Refund" tool is updated once daily, usually overnight. Your status is generally available within 24 hours upon the IRS receiving your e-filed return and 4 weeks after mailing your paper return.
If you are claiming the Earned Income Tax Credit or Additional Child Tax Credit, your refund won't be released by the IRS until mid-February. The IRS expects the first EITC/ACTC related refunds to be available in bank accounts or on debit cards by the first week of March, if you chose direct deposit and there were no other issues with the tax return.
Scammers and IRS Impersonation - Did You Know?
The IRS has issued alerts about scammers that are continuing to contact taxpayers. Among the most common are phone calls and fake emails. Thieves use the IRS name, logo or a fake website to try and steal money from taxpayers.
Any first contact from the IRS will typically come in the mail.
Please note that the IRS will never:
- Call to demand immediate payment using specific payment method such as a prepaid debit card, gift card or wire transfer
- Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying
- Demand payment of taxes without giving you the opportunity to question or appeal the amount owed
- Ask for credit or debit card numbers over the phone
For information on how to report scams or phishing attempts, visit http://IRS.gov/phishing.
New W-4 Form for 2020 – Did You Know?
The IRS has made a number of changes to Form W-4, the Employee Withholding Certificate, for tax year 2020. Most employers require employees to complete a Form W-4 in order to receive paychecks. Here are four key facts to remember about the new-look form:
- If you provided a W-4 to your employer in a previous year and are happy with your current withholding amount, you do not need to submit a new W-4 in 2020.
- If you start a new job in 2020, or wish to submit a new W-4 to your current employer to adjust your withholding, you must use the new 2020 form.
If your tax situation is simple (for example, one job, no dependents), you may provide your personal information and filing status in Step 1 of the form, and then skip down and sign the form in Step 5.
- Steps 2, 3 and 4 of the form are intended for those with more complex tax situations, such as couples with two incomes, workers with multiple jobs, and those with non-employee income (self-employment or “gig” work, interest, dividends, etc.).
For privacy protection and the most accurate withholding, use the IRS Tax Withholding Estimator link, found below, in conjunction with Form W-4. This tool helps you calculate any needed adjustments to your paycheck withholding. After using the Estimator, enter the recommended increase to your withholding on W-4 line 4(c), or the recommended deduction from your withholding on line 4(b). A qualified tax pro can help you determine which information to enter into the Estimator to get the most reliable result possible.
IRS Tax Withholding Estimator: https://www.irs.gov/individuals/tax-withholding-estimator.
Year-End Transactions Can Change Your 2019 Tax Refund
Now is the time to prepare to file your 2019 tax return, and the IRS is reminding taxpayers that certain end-of-year financial transactions might have significant tax impacts. Tax withholding from paychecks does not ordinarily take into account income sources like yearly or holiday bonuses, stock dividends, or selling real estate or other property at a profit. If you receive such income, you might end up getting a smaller tax refund than you have been anticipating, or even owing tax and penalties for underpayment.
In addition, the IRS reminds taxpayers that if they have outstanding debts like unpaid taxes from previous years, past-due child or spousal support, or overdue student loan payments, their 2019 tax refunds might be reduced by these amounts under the Treasury Offset Program (TOP).
An experienced tax pro can help you determine the tax implications of income you received late in 2019.
2020 Mileage Rate Increase
Starting on Jan. 1, 2020, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 57.5 cents for every mile of business travel driven, a decrease of one half of a cent from the rate for 2019.
- 17 cents per mile driven for medical or moving purposes, a decrease of 3 cents from the rate for 2019.
- 14 cents per mile driven in service of charitable organizations.
You may also have the option of calculating the actual costs of using your vehicle rather than using the standard mileage rates.
Reduce Fees & Penalties - Did You Know?
You should still file your taxes, even if you can't pay, as the failure-to-file penalty may be 10 times more than the failure-to-pay penalty. If you are unable to pay in full, try to file your tax return and pay as much as you can.
January 31, 2020 Deadline for Filing 1099 Forms – Did You Know?
If you are self-employed or own a business, remember that you may have to send an IRS Form 1099 to any contractor to whom you paid $600 or more in 2019. In most cases, appropriate 1099 forms must be provided to contractors by January 31, 2020. Any Form 1099-MISC that shows nonemployee compensation (Box 7) must also be filed with the IRS by January 31. The deadline for filing most other 1099 forms with the IRS is February 28, 2020 for paper filing, or March 31, 2020 for electronic filing.
Since filing electronically requires special formatting software and permission from the IRS, many small business owners may still have to file paper 1099 forms, along with a Form 1096 cover sheet. A qualified tax advisor can help you determine which forms you need to file, how you can file them, and which deadlines apply to your situation.
Tax Rules for Virtual Currency (Bitcoin) – Did You Know?
For individuals, basic currency transactions like exchanging dollars for euros while traveling generally have no tax implications. However, the IRS treats virtual currencies like Bitcoins (also called cryptocurrencies) as property, not as true currencies. As a result, many transactions with virtual currencies result in capital gains (or losses) that must be reported on your tax returns. The amount of your capital gain (or loss) is the difference between your cryptocurrency basis and the dollar-value you receive by selling, trading or using the currency to make a purchase. Usually, your basis is either the number of dollars you paid for the currency or, if you received the currency as payment for a service, the fair-market value of the currency at that time.
For example, suppose a company pays you 2 Bitcoins for a project; on the day you receive the payment, the fair-market value of 2 Bitcoins is $16,000. You later use the same two Bitcoins to purchase a car valued at $21,000. Your capital gain on these two transactions is equal to $21,000 – $16,000 = $5,000. As with all capital gains, you may pay significantly less tax if you held the Bitcoins for more than a year (long-term vs. short-term capital gains tax rates).
If you have any cryptocurrency, a qualified tax advisor can help you to determine your basis and develop methods to track your transactions so that you can properly report them.
Quarterly Estimated Tax Payments - Reminder
If you are making quarterly estimated tax payments to the IRS, the due date for the September 1 – December 31 quarter of the previous year is January 15, 2020.
For payments made using IRS Direct Pay, you can make payments until 8PM EST, and for payments using a credit or debit card, payments can be made up to midnight on the due date.
If the due date for making an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be considered on time if you make it on the next day that's not a Saturday, Sunday, or legal holiday.
Filing Season Start - Did You Know?
The IRS has confirmed that the individual tax filing season will start on Monday, January 27, 2020 and the deadline to file 2019 tax returns and pay any taxes owed is Wednesday, April 15, 2020.
Although the IRS systems open for processing on January 27, you do not have to wait until then to begin preparing for your tax return.
Smart Tax Planning for Those with Irregular Income – Did You Know?
If your income varies from year to year – for instance, if you change jobs often or get a significant part of your income from the gig economy – tax planning can get complicated. Certain activities that increase your tax bill during higher-income years might have little impact during lower-income years. Similarly, an expense that results in a sizable tax deduction during a lower-income year might not be deductible at all during a year when your income is higher.
For example, if your income for a particular year falls into the 10% or 12% IRS tax bracket ($39,475 or below for single filers, or $78,950 or below for joint filers), you might qualify for a 0% long-term capital gains tax rate. Therefore, it might be an especially good year to sell property that you have held for 12 months or longer. Meanwhile, the two major advanced education tax credits, the American Opportunity Credit (AOC) and the Lifetime Learning Credit (LLC), have different income limits. As a result, some years might be more favorable than others for pursuing particular educational goals.
A qualified tax advisor can help you determine which activities with potential tax implications would be most appropriate to undertake this year, and which others you might want to defer until a later year. Thoughtful planning can yield substantial tax savings over time.
'Tis the Season for Important Tax Paperwork
Keeping your records organized will help make sure you don't miss out on valuable deductions when it is time to file.
Some documents to be on the lookout for are:
Wage and income statements (like W-2 or 1099-MISC)
Health Insurance statements (like Form 1095)
Proof of qualifying educational expenses (like Form 1098-T)
Mortgage interest statements
Retirement distribution statements
Investment account statements
AOTC or LLC Education Tax Credit – Which Is Best for You?
The IRS offers two important tax credits for higher education expenses: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). You may claim both credits on the same tax return, but not for the same person. For example, you might claim the AOTC for your college-age dependent children and the LLC for your spouse.
If two or more members of your household are enrolled in qualifying post-secondary education programs, you may be able to claim multiple AOTCs. The LLC, on the other hand, may only be claimed once per return. The biggest advantage of the LLC is that you may use it an unlimited number of times for the same person over the years. By contrast, a student can qualify for the AOTC a maximum of four times in a lifetime.
In addition, although the AOTC offers a larger maximum credit and higher income limits than the LLC, it places more restrictions on the student's enrolment status and the nature of the educational program. A qualified tax advisor can help you determine which combination of these credits will serve your family best.
Retirement Plan Contribution Limits Increase in 2020 – Did You Know?
IRS limits for individual contributions to employer-sponsored retirement plans are increasing in 2020. If you are an employee who participates in 401(k), 403(b), the Thrift Savings Plan for civil and uniformed service members, or most types of 457 plans, you may contribute up to $19,500 in 2020, up from $19,000 in 2019. The catch-up contribution limit for employees 50 years of age or older also increases in 2020, from $6,000 to $6,500. Therefore, if you are an employee age 50 or over, you may be able to contribute as much as $26,000 to your 401(k) in 2020.
The contribution limit for SIMPLE retirement accounts likewise increases by $500 in 2020, from $13,000 to $13,500. In addition, income limits for both Roth IRA contributions and tax-deferred contributions to traditional IRAs are higher. A qualified tax advisor can help you develop a strategy to take advantage of all these increases to boost your retirement savings in the New Year.
Giving Tuesday and Charitable Donations - Did You Know?
Giving Tuesday is an annual event that highlights charitable giving after Thanksgiving.
If you are considering charitable donations, you may be able to donate to a Donor-Advised Fund (DAF) every two or three years instead of every year. This may qualify you to receive tax benefits now, allow the amount to grow tax-free, and the decision on which qualified charity to fund can be made later.
If you are 70.5 years or older, you may be able to make a qualified charitable distribution (QCD) from your IRA this year, and this may satisfy all or part of the required minimum distribution (RMD) each year.
The IRS has released a tool to make it easier to get information about qualified charitable organizations. The Exempt Organizations Select Check tool can be found at: https://www.irs.gov/charities-non-profits/tax-exempt-organization-search.
IRS Announces New Per Diem Rates – Did You Know?
The IRS recently raised the per diem rates for employee travel expenses, effective October 1, 2019. Within the Continental U.S., the new basic daily rates are $297 for high-cost regions (of which $71 is allotted for meals), and $200 for low-cost areas (with $60 for meals). The "incidentals only" per diem, which covers expenses like tipping bellhops, remains at $5 for all locations.
Per diems allow companies to reimburse employees for travel expenses at fixed rates, rather than having to process receipts for actual expenses. In most cases, per diem reimbursements can be deducted on the employer's tax return and do not count toward employee wages, as long as employees file appropriate expense reports showing the location, dates and purpose of the trip. Note, however, that the meals portion of a per diem is subject to the standard 50% deduction limit for meal expenses.
Because the Tax Cuts and Jobs Act (TCJA) eliminated most deductions for unreimbursed employee expenses, finding the most efficient way to reimburse employees for travel expenses is more important than ever. An experienced tax pro can help you determine whether it is best for your company to use standard per diems or to track actual employee travel expenses.
Renewing ITINs - Did You Know?
Individual Taxpayer Identification Numbers are used for taxpayers who are required for U.S. tax purposes to have a U.S. taxpayer identification number but do not qualify to get a social security number.
If you use an ITIN, you should check if it expires this year. If it does, information about how to renew your ITIN can be found at: https://www.irs.gov/credits-deductions/individuals/how-do-i-renew-my-itin. Keeping your ITIN current helps avoid tax refund and processing delays.
Taxpayers who have not used their ITIN to file a federal return at least once in the last three years will see their number expire Dec. 31, 2019. Additionally, ITINs with middle digits of 83, 84, 85, 86 or 87 (e.g. 9NN-83-NNNN) will also expire at the end of the year.
Claiming the Other Dependent Tax Credit – Did You Know?
If you have a dependent who does not meet the criteria for the Child Tax Credit (CTC), you may still qualify for a $500 credit called the Other Dependent Credit. Also called the Family Tax Credit, this nonrefundable credit was created under the Tax Cuts and Jobs Act (TCJA) of 2017. Examples of qualifying dependents include children of age 17 or 18 (or up to age 23 if they are full-time students), and adult relatives who are unable to support themselves due to a disability.
Your claimed dependents must be US citizens, resident aliens, or nationals, and must have a taxpayer ID number (SSN or ITIN). Children must not have been claimed for the CTC by you or anyone else, must rely on you for at least half of their financial support, and generally must live with you for over half the year. Claimed adult dependents (called “qualifying relatives” by the IRS) must have a gross income of less than $4,200 for 2019, and must either be your true relative or live with you full time. The term “true relative” covers a broad range of relationships, including in-laws and stepchildren.
A qualified tax advisor can help you determine your eligibility for the Other Dependent Credit. If you have more than one qualifying dependent, you may be able to take the credit for each of them.
Tracking Utilities for Home Office Expense – Did You Know?
If you plan to claim a deduction for Expenses for Business Use of Your Home (home office expense) on your tax return, you need a reliable method to calculate your deductible utility costs. IRS rules require that you separate utility expenses that apply to only the residential portions of your home (such as cooking gas or electricity used by your refrigerator) from those that pertain to the entire property. Only the latter type can qualify as home workspace expenses.
For example, if your cooking range, water heater and furnace all run on natural gas, you may need to figure out the gas cost associated specifically with heating your home. One way to do this is to average your gas bills from summer months when you did not use heat. This average shows how much of your gas bill is attributable to your range and water heater. By subtracting this amount from your gas bill for every month, you can calculate how much money you spent specifically on heat during the year. You may then be able to deduct a portion of this total as a home office utilities expense, based on the area of your workspace.
An experienced tax pro can give you other ideas for tracking and calculating the allowed utility costs associated with your home office. The IRS does not require perfect accuracy, but your calculation methods must be logical, reasonable and based on written evidence such as monthly utility bills.
Christina Villeneuve, CPA has been helping her clients implement tax saving strategies for over 30 years. Her practice specializes in tax planning and tax preparation for high net worth individuals as well as representation before the IRS and state tax authorities when the need arises.
Over the years, Christina has worked with thousands of clients and strives to give her clients the highest level of customer service and personal touch which has resulted in a very loyal client base. Although she has worked with many small business customers spanning a variety of industries [retail, construction, medical, commercial real estate, and publishing to name a few], her highest satisfaction comes from her individual  client base, strategically working together to minimize their tax liability.
American Institute of Certified Public Accountants
Virginia Society of CPA's
National Association of Tax Professionals
National Society of Tax Professionals
Northern Chapter of the VSCPA's
Professional Tax & Accounting Services for Individuals & Small Businesses
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